Correlation Between Saab AB and AB SKF
Can any of the company-specific risk be diversified away by investing in both Saab AB and AB SKF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Saab AB and AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saab AB and AB SKF, you can compare the effects of market volatilities on Saab AB and AB SKF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Saab AB with a short position of AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saab AB and AB SKF.
Diversification Opportunities for Saab AB and AB SKF
Good diversification
The 3 months correlation between Saab and SKF-B is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Saab AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF and Saab AB is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Saab AB are associated (or correlated) with AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Saab AB i.e., Saab AB and AB SKF go up and down completely randomly.
Pair Corralation between Saab AB and AB SKF
Assuming the 90 days trading horizon Saab AB is expected to generate 1.64 times more return on investment than AB SKF. However, Saab AB is 1.64 times more volatile than AB SKF. It trades about 0.07 of its potential returns per unit of risk. AB SKF is currently generating about 0.04 per unit of risk. If you would invest 17,163 in Saab AB on November 3, 2024 and sell it today you would earn a total of 6,882 from holding Saab AB or generate 40.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Saab AB vs. AB SKF
Performance |
| Timeline |
| Saab AB |
| AB SKF |
Saab AB and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Saab AB and AB SKF
The main advantage of trading using opposite Saab AB and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saab AB position performs unexpectedly, AB SKF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AB SKF will offset losses from the drop in AB SKF's long position.| Saab AB vs. SSAB AB | Saab AB vs. Boliden AB | Saab AB vs. Sandvik AB | Saab AB vs. Telefonaktiebolaget LM Ericsson |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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